Hi everybody since the past 1.5 years we've been hearing the news about the government's plans to shut down bsnl and ever since we started following the news we've always seen bsnl as a loss incurring company which incurred thousands of crews of losses every single year in fact in the past 10 years itself bsnl has incurred a combined loss.
Of more than 80 000 crores and considering the case of air india and government bureaucracy in general we by default assume that bsnl is also one of those ill-run businesses that the government just cannot handle isn't it well guess what in fi 21 while the market went crazy to see that reliance jio generated a profit of 12 000 537.
Crores very few of us know that there was a time when bsnl generated a profit of 10 000 183 crores and that too in a single year and from 2001 to 2008 bsnl generated a cumulative profit of 46 668 crores which was more than the next three telecom operators combined and that too in spite.
Of all the subsidized schemes that it rolled out for rural areas and for farmers and not just that it once had a market share of 70 and literally acted as the backbone of the indian telecommunication industry so the question is what exactly went wrong with bsnl that it suddenly went from being a dwell of india to a sick company in less.
Than a decade was it yet another government mishandling or was it deliberately paralyzed by the private sector and most importantly as citizens of india what are the lessons that we need to learn from the tragic downfall of bsnl this video is brought to you by wind but more on this at the end of the video.
to understand the fall of bsnl we first have to understand why is it critical for a nation like india to mandatorily have government companies operating in certain sectors even though they incur heavy losses well in this case there are three important reasons that very few people.
Understand the first reason why a government company is essential is for accessibility you see if a company like airtel wants to serve a particular region then the most important factor is going to consider is profits so if there are only 100 farmers living in a particular village with only 10 of them who can offer to pay for airtel then for.
Airtel setting up a tower spending a ton of capital and human resource does not make any sense at all because eventually it will incur losses but if you look at it from the common standpoint while for ltl they are just customers for the government of india they are citizens of the country who need to be taken care of who need to be.
Uplifted so they can eventually go on to contribute to the economy of the country why because only when they have access to basic facilities like telephone electricity and water can they actually become resourceful to the economy of india in fact many of you must have even heard about something called the krishi sim card that offers dirt cheap internet.
And calling to farmers and this is also the reason why even today you will see that bsl's network is available even in the remotest parts of our country whereas your idea jio and airtel do not work in those regions especially a region like ladakh and this brings me to the second reason and that is regulation which means tomorrow if.
Jio and airtel join hands to become a do a pulley they might start increasing the price of their data and now that internet has become super important to us even if these companies double the charges of the internet we will have to pay them anyways but in this case if a company like bsnl exists it will by.
Default give out service at a nominal rate that way the people who cannot afford a jio or airtel will always have a company like bsnl to fall back on and lastly in case of a natural calamity like that of uttarakhand or even a wartime situation again while airtel and jio might not consider it their agenda to set up towers bsnl is obligated to.
Set up their infrastructure at the earliest because it is not a question of profits but a question of citizen safety and in case of a war scenario it is a question about national security itself now although this could be done with strict regulation on private players it is always safer to have an in-house organization for these critical.
Requirements these are the reasons why even if bsnl bleeds hundreds of crows of losses it is very very important to keep the company alive but in case of bsnl let alone losses the company was a market leader with 10 000 crores in profits and it was only after 2008 that bsnl suddenly started.
Incurring losses so the question is how this is a story that dates back to early 2000s during this time landlines were the primary mode of communication and during this time bsl occupied nearly 70 to the market and with evolving tag bsnl also started laying the foundations for 2g internet connections at the remotest corners of the country whereas other.
Private players found it commercially unviable to do that during that time and in spite of reaching the unviable locations bsnl managed to earn such hefty profits that they posted profits of 5976 crores 10 0183 crores and 8939 crores during 2003 4 and 5. until this time the company was operating almost like an autonomous body with very less.
Scrutiny from the government committees but this is when a news brokered about the telecom minister of india the central bureau of investigation interrogated former telecom minister diana de in the illegal telephone exchange case on wednesday maran who was the indian telecom.
Minister between 2004 and 2007 of using his influence in colluding with senior officials of the state-run bsnl to draw 323 high-speed lines to his residence well it is alleged that the exchange was set up to upload signals of channels of the sun tv network a multi-lingual television empire owned by kalani maharan.
Long story short according to the cbi danny de maran used his official position and got private telephone exchanges installed at his residence these 700 high speed lines were used for business transactions of the sun network which was owned by his brother kalani this case was a very very big deal not because of the laws but because fraud.
And ministry and government and keeping huge phone systems off record is also a national security risk this was where the government started getting involved in bsnl's matters and this is where a man named a raja took over the reigns from maran in 2007. during this time psnl was in discussion about rolling out something called the.
Ymax technology this was a telecommunication technology that was aimed at providing wireless data over long distances basically wireless broadband this would have helped bsnl roll out speedy internet connections all across the country but guess what this is where one of the.
Biggest scams in indian history came to light which was the 2g scam three days before parliament resumes the decade's biggest scam has triggered a political war parliament said to resume in three days the report is likely to trigger yet another political battle the jpc has put the blame squarely on then telecom minister a raja claiming he.
Misled the prime minister on procedures followed now when this happened although it did not affect bsnl directly it was very evident that a lot of frauds might be taking place within the company so after 2007 onwards the garment started inquiring every small tender that bsnl ruled out this is where the company started to slow down starting from its.
Tender system now for those who don't know about the tender system here's a very simple explanation to understand the same the way the system works is that let's say the government wants to build a bridge so what will it do it will roll out a tender inviting all the construction companies in the country by stating all the requirements of building.
That particular bridge then multiple companies will come together and they will start presenting their plans and cost of building the bridge then after these proposals are submitted the government will check what is the background of the company which one of these companies has actually completed similar projects in the past.
What is a methodology of execution and most importantly what is the cost and time of execution of the project and based on these parameters the company is given the contract by the government to execute the project in this case instead of a bridge it was about laying down the communication technology like wimax to enable wireless broadband all across the.
Country but this is where the setback started coming after the marant incident and the 2g scan the government started digging for corrupt practices that could have happened in the tender system and not so surprisingly according to economic times a string of shell companies and dubious companies were being shortlisted and at.
The same time several reputed companies with proven track record of offering vimax services were disqualified in the first round itself these companies included soma networks and cisco back teracom and even unwire india and the moment these type of news started coming out cbi got into the case and soon enough according to some.
Employees bsl was not allowed to procure equipments and materials and orders were delayed and cancelled and the entire company started to slow down according to economic times during this three year period that is between 2007 to 2010 while indian telecom industry was growing at the fastest pace in history while every other private player was.
Aggressively scaling up their infrastructure and were pouring in crows rupees into accreditation bsnl was not able to place any significant orders for equipment so practically with each passing day bsn was losing its market share to private sectors and while the company was at the brink of sinking into losses in 2008.
Nine somehow a new ray of hope came up in 2009 a project worth 10 billion dollars was taken up by bsnl to lay down 93 million gsm lines all across the country and this could have enabled bsnr to provide top-grade voice and data facilities all across the country and had this project gone through it seemed like bsnl would have been the undisputed.
King of telecom in india and this project at that time was the world's largest telecom contract but guess what in 2010 the central vigilance commission started suspecting irregularities and again when dig deeper they pointed out that the disqualification of important vendors like nokia cements zte and.
Alcatel had left only two players in the bid which were ericsson and huawei and since they were the only contenders left bsnl could not get the best price as there was no competition with the contract at all and because of this irregularity again the entire 10 billion dollar tender was cancelled and bsn was asked to start all over again.
And while bsl was still cluelessly trying to issue tenders they had run out of mobile network capacity in most regions of the country and during the exact same time airtel vodafone id and other players started to rule out 3g services and eventually started eating into bsnl's market share as a result during this time from 2007 to 2010 the.
Profits of the company started sliding from 3009 crores in 2007 to a loss of 1822 crores in 2010 and guess what due to this stalling according to the employees of bsnl that we spoke to from 2006 to 2012 during the most important growth period of indian telecom bsl made very few to none significant purchases into development of its infrastructure.
This was the first and perhaps the most important reason for bsnl's downfall which was power hungry greedy ministers who wanted to fill their pockets at the cost of a national asset and here's where things started getting worse as the mobile revolution picked up bsnl's most important source of revenue that is landline phones started to go obsolete.
The number of landline phone users had dropped from 24 million in 2016 to just 19 million in july 2020 and here's where the second blow came up when jio wave emerged in 2016. the world is at the beginning of a digital revolution so ladies and gentlemen today.
I have great pleasure in announcing a revolutionary concept for the indian market all voice calls for jio customers will be absolutely free reliance jio has become the largest telecom operator in india adding 5.6 million mobile subscribers in november.
Now while most people think free data and calling was the sole reason for jio's growth very few people understand that it was actually a massive advantage that 4g as a technology gave to jio both in terms of cost and service the question is how now let's take an oversimplified case to understand how 4g is different from 2g or 3g if yash and i.
Are talking to each other in the early 2000s the process would look something like this when i press the call button on my phone a digital signal is sent from the antenna on my mobile phone to the nearest cell tower from there the signal is transmitted to a switching center now my switching center contacts other centers in the complex network to.
Identify the center closest to yash and once yes switching center is identified and notified it sends a signal to the cell tower that is nearest to yash which then transmits it to his phone and his phone starts ringing and when answered the connection is established through a complex underground network this path is called circuit and this process is.
Called circuit switching now for data the case was a little different here a different communication method called packet switching was used in this method if you are sending an email your entire email is broken down into multiple packets wherein each package could be containing a single word or sometimes even a single letter but with this data.
The address of the receiver is also mentioned then once the email is grouped in packets these packets are rooted through a huge network wherein each packet might take a different route and sometimes they might even go all across the world so by breaking the communication information down to small packets it.
Allows the same path to be shared among multiple users in the network now in case of both 2g and 3g both voice network and data network had to be maintained separately but this is where jio came up with the revolution and the advantage that jio had over any other telecom player was that it was a purely 4g network so while.
Others had to run one network each for voice and data jio had to maintain only one network for data because even their calls were rooted through the data network this paradigm shift and approach lowered the cost of equipment by a very very large extent as a result it lowered the operating cost for the 4g network and in comparison to jio our poor bsnl.
Did not even get the approval for 4g and was using decade old and energy inefficient equipments and occupied a large real estate footprint this drastically short of their cost while jio was using the same margin of cash to acquire millions of customers with each passing year and finally it was only in 2019 that bsl.
Got the spectrum allocated and now they are moving to 4g and bsl is yet to start with 4g rollout in 2022 and lastly because of the cash crunch human resource management of bsnl started to shake now people this is also very very detailed but then if i get into the details of it it will result in information overload so i'm going to.
Attach the sources of this matter in the description so that you can read that completely by yourself so this is how a golden goose of the indian economy was paralyzed to go from 10 000 183 crores in annual profits to a loss of fifteen thousand four ninety nine crores in twenty nineteen twenty and this brings me to the most important part of the.
Episode and that are the things that you need to learn and read about so that you understand the functioning of government companies and you understand what the government is doing with your tax money before we move on i want to thank our partners with for supporting our content wind wealth is a platform by which you can invest in nbfcs with very strong.
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Think school is an investor in wind wealth so if this sounds useful to you check out wind wealth from the special link in the description moving on the first thing you need to understand is that while businesses function to profit from the customers government companies function for national duty and economic upliftment of.
Its citizens so don't ever blindly compare them with government companies and say that garment companies suck because that's what i did in the beginning because of my ignorance number two talk to ex or current bsl employees and they will tell you that this entire video barely scratches the surface and there are hundreds of other.
Non-documented reasons by which bsnl was paralyzed calculatively and you must do that for all government companies because it will give you a deeper understanding of the functioning of these companies and lastly i am attaching a ton of study materials in the description so please go through them because of constraint of time and.
Information overall like i said i have tried to cover the most important points but if you want to have a look at the bigger picture i would highly recommend you to go through those sources and drop a comment about what you think about bsnl and other government companies that are handled or mishandled by the existing or the previous government.
That's all from my starter today guys if you learned something available please make sure that the like button in order to make youtuber happy and for more such insightful business and political case studies please subscribe to our channel thank you so much for watching i will see you in the next one bye bye.